Nonetheless, Powerchip is bullish about the year ahead, predicting limited new supplies as bigger rivals like Samsung Electronics Co plan to use their new plants to make flash memory chips for consumer electronics devices, rather than computer memory chips.

DRAM manufacturers are increasingly shifting to the production of NAND flash memory chips in the pursuit of better earnings. NAND chips, which retain data when power is switched off, are used in Apple Computer Inc's iPod Nano music players and Sony Corp's PlayStation Portable game consoles.

"The DRAM market will be quite good this year, if you look at the supply side," Powerchip president Brian Hsieh (謝再居) told reporters yesterday.

While memory-chip manufacturers worldwide have expanded production at an annual rate of almost 50 percent over the past few years, global growth could shrink to around 40 percent this year, which is in line with Powerchip's expectations, Hsieh said.

That would boost Powerchip's sales for this year to fall to between NT$80 billion and NT$100 billion (US$2.5 billion and US$3.1 billion), he said.

Powerchip's optimism was in contrast to the fourth-quarter trough that had landed chipmakers in the doldrums.

"The price has plunged over 50 percent in the fourth quarter [of last year from the previous year], but we still manage to earn money," Powerchip chairman Frank Huang (黃崇仁) said.

Powerchip said that net income amounted to NT$1.1 billion, or NT$0.2 a share, in the October-December period.

That represented a drastic correction from the NT$5.77 billion, or NT$1.41 a share, the company earned during the same quarter of 2004.

Its gross margin fell to 15.4 percent, from around 45 percent in the final quarter of 2004.

"The results fell short of my expectation," said Frank Wang (王安亞), an analyst with Morgan Stanley in Taipei.

The quarterly earnings are only half of the NT$2.1 billion Wang forecast. He gave an "equal-weight" rating to Powerchip with a target price of NT$20, below the closing price of NT$20.60 yesterday on the over-the-counter GRETAI Securities Market.

"I'm not as optimistic as Powerchip is. At this point, I don't expect the